Here we go again… EBA plots reform of European payments rules

The European payments sector has been on a voyage since PSD2 upended payments regulation in 2018. Last year the European Commission sent out an S.O.S. for ideas on how to update the regime and now the European Banking Authority has obliged. In its opinion the EBA suggests (mamma mia!) over 200 ways PSD2 could be changed.

The curtain-raising proposal is to merge PSD2 with the Electronic Money Directive. At the moment these represent separate but interlinked regimes. Their reunion should mean that payment institutions and e-money institutions are harmonised.

For many of the other proposals the name of the game is to clarify the existing framework. The EBA says there have been some misses among PSD2’s hits and a “significant number” of issues need to be addressed. In the spotlight are key definitions (including the meaning of key concepts like “payment account”, “payment instrument” and “initiation of a payment transaction”), the scope of exclusions, and the application of strong customer authentication.

Uncertainty around key concepts means some providers take a chance on how they interpret them. To clarify their scope, the EBA recommends grouping some regulated payment services and drawing a clearer line between others. For example, the opinion discusses the difference between money remittance and executing payments via credit transfer. The EBA would also like to clarify how to identify the place of provision of services online.

Although PSD2 is about money money money, the EBA is also looking beyond payments. So-called open banking requirements in PSD2 opened up access to payments account data. “Open finance” would reprise this but for other types of financial data, for example on savings, investments and insurance.

Like the UK, the EU worries that some new players in the payments chain are slipping through its regulators’ fingers. The EBA would like to see payment card schemes, payment gateways and merchants subject to some payments-specific requirements but stops short at suggesting these businesses should be authorised.

The Commission takes it all… into account as it weighs up changing PSD2. It is expected to release draft legislation (which has already been dubbed PSD3) before the end of the year.